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2018 (6) TMI 1513 - AT - Income TaxEligibility for exemption u/s 11 - proof of charitable activities - Testing of water and supplying good quality of water contribute to health of the people - Held that - Assessee s activity comes within the purview of exceptions provided sub-section (15) of sub-clause (i) for the reason that the activity of the assessee is testing of the water quality, which monitors quality in reservoirs and slum areas, for that, assessee has charged some fee and almost the entire fee was spent towards testing activity, as admitted by the CIT(A) himself. Testing of water and thereby supplying good quality of water contribute to health of the people. Therefore, the activity carried out by the assessee as per its object to take care of health of the people and the activity of the assessee has to be considered as advancing of general public utility. Therefore, the assessee is eligible for exemption u/s 11. Assessee is entitled for exemption u/s 11. - Decided in favour of assessee.
Issues involved:
1. Denial of exemption u/s 11 of the Income-tax Act, 1961 for the assessment year 2014-15 based on the nature of activities carried out by the assessee society. Analysis: Issue 1: Denial of exemption u/s 11 The case involved an appeal filed by the assessee against the order of the CIT(A) denying exemption u/s 11 of the Act for the assessment year 2014-15. The Assessing Officer (AO) had denied the exemption, stating that the assessee's activities, particularly providing services to Hyderabad Metro Water Supply and Sewerage Board (HMWSSB) for water quality testing, did not align with charitable purposes. The AO considered the activity as professional/technical services, not falling under the charitable ambit. The CIT(A) upheld the AO's decision, emphasizing that the assessee's expenses were related to water testing only, which he deemed as commercial activity. The assessee contended that it was a nonprofit organization working for public health, specifically contributing to water quality testing for HMWSSB to ensure the supply of good quality water to the public. The assessee argued that despite charging fees, its activities were charitable in nature. The ITAT analyzed the nature of the assessee's activities, noting its involvement in various public health projects and the significant expenses incurred in testing water quality. The ITAT observed that the assessee's primary objective was to contribute to public health, and its collaboration with HMWSSB aimed at providing quality water to the public. The ITAT differentiated the assessee's service-oriented approach from profit-driven entities like diagnostic centers and road contractors. Referring to Section 2(15) of the Act, the ITAT concluded that the assessee's activities fell within the scope of advancing general public utility, making it eligible for exemption u/s 11. Consequently, the ITAT allowed the assessee's appeal, affirming its entitlement to the exemption. In conclusion, the ITAT's judgment clarified that the assessee's activities, particularly in the realm of public health through water quality testing, qualified as charitable in nature, aligning with the advancement of general public utility. The decision underscored the distinction between profit-oriented ventures and service-oriented organizations like the assessee, ultimately granting the assessee the exemption u/s 11 of the Income-tax Act, 1961 for the relevant assessment year.
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